By LOU WILIN
More income will go to oil refiners and less to farmers because of a new federal rule reducing the amount of ethanol blended with gasoline, a Poet Biorefining official said Thursday.
Within weeks, the federal Environmental Protection Agency is expected to reduce the refiners’ ethanol-blending requirements for 2014, said Mark Borer, general manager of Poet Biorefining in Leipsic.
That will mean a 1.4 percent reduction from the 13.2 billion gallons the U.S. ethanol industry produced last year, he said.
The amount of required ethanol in gasoline has been rising in recent years, and was expected to climb to 15 percent. Currently, fuel with up to 10 percent ethanol is sold nearly everywhere, he said.
Oil refiners oppose the trend to more ethanol because it means they lose revenue, Borer said.
Ethanol is cheaper than gasoline, he said. Over the past three years, ethanol’s price has averaged 30 cents to a dollar less per gallon than gasoline, Borer said. So, fuel containing 15 percent ethanol costs less and is likely to sell faster than fuel containing 10 percent ethanol, he said.
“The oil industry has fought pretty hard to keep from having to (produce higher-ethanol fuel blends) because we’ve gotten 10 percent of the market,” Borer said. “We’re very confident that if the consumer gets a chance to go to the station and select E15 (15 percent ethanol fuel) at a lower price than E10, they’re going to do that. So, that will further erode the oil industry’s market share, which again, they are fighting.”
Lower ethanol production will mean less use of corn and an oversupply of it, he predicted. That will reduce corn prices and hurt farmers, he said.
The Poet plant in Leipsic buys corn from 750 farmers within 35 to 50 miles of Leipsic. Purchases by it and other ethanol plants have propped up corn prices and land values, he said.
Farmers are saying their children are now able to return to the family farm because the operation is making money again, Borer said.
But a reduction of ethanol production would reverse that trend, he said.
The corn price “can get significantly lower, real, real fast because you’re back to an oversupply situation like we were for 20, 30 years,” Borer said.
“That’s going to really challenge the small-time farmer. It’s going to be real significant, if this continues.”
Farmers can switch crops to soybeans or wheat, but they won’t be able to escape lower prices, because if many do switch, they will create an oversupply of those grains, too, he said.
“What’s gotta happen is either you’ve got to figure out a way to live on $2 (per bushel) corn again, just throwing a number out there … and they can’t … live off $2 corn,” Borer said. “The government’s got to say, ‘OK, we’re going to get back in the market and we’re going to start subsidizing the farmer again.'”
Another problem for the farmer is the federal farm bill does not offer farmers the support it once did, he said.
“So what you’re going to have is, you’re going to have a deterioration of the value of a farm,” Borer said.
Wilin: 419-427-8413 Send an E-mail to Lou Wilin
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